Post Created in Collaboration with EURORISK
I promised to keep you updated on what happened with my insured spring barley and oats.
Anyone involved in agriculture in Estonia knows that this year was, yet again, quite challenging. We faced about a month of drought, which threatened (and often destroyed) the yield of spring crops.
My interest in drought insurance was purely practical—to see if it works and how beneficial it might be for risk management. Additionally, the positive experience of our neighboring countries, Latvia and Lithuania, gave me some courage to try it. In Latvia, for instance, EURORISK insures roughly one-third of arable land.
How Did My Insurance Premium Turn Out?
- In total, I insured crops on 54.17 hectares: 35.1 ha of oats and 19.07 ha of spring barley.
- The insured value of the fields, based on yield forecasts and prices at the time, was slightly over €48,000.
- The insurance premium was 3.3% of the insured value, amounting to €1,598.62.
- Spread across the hectares, this makes the insurance cost €29.5/ha, which is roughly equivalent to the price of a single application of windgrass control or under 30 kg of nitrogen per hectare.
In good times, one might think, “What’s a few dozen euros per hectare?” But given today’s situation, every euro counts, and I’m not particularly interested in insuring against something that might happen (though it seems like this may be the new normal).
However, fortunately, there is an agricultural insurance subsidy measure in Estonia through PRIA, allowing 70% of the insurance premium to be reimbursed.
- With the 70% reimbursement, my insurance premium was reduced to €479.59, bringing the cost per hectare down to €8.85. That’s cheaper than a single round of micronutrient spraying or 10 kg of nitrogen per hectare.
Did the Compensation Come Through?
At that price, it seemed like a great deal: I insured my spring crops, and, as everyone knows, drought followed. At first, I kept an eye on the moisture deficit graphs displayed on EURORISK’s website as if they were weekly shows, but then I got caught up in the harvest. I thought about insurance again when I was harvesting my barley yield of around 600 kg/ha (the poorest in Estonia, as far as I know), but then set it aside.
However, in early October, I received an email from the insurer indicating that I was eligible for compensation for drought damages. My fields experienced moderate drought in at least two measurable stages.
- The compensation for my oat fields was set at 4% and for spring barley fields at 4.5% of the insured value.
- Oat compensation: €1,213.06
- Spring barley compensation: €815.24
- Total: €2,028.3
- After deducting my own contribution of €479.59, the net compensation came to €1,548.71.
- Net compensation rate: €28.5/ha
Without the PRIA subsidy, the net compensation would have been only about €8/ha.
As I mentioned earlier, the PRIA subsidy makes it much more manageable, even if there’s no drought. But when the risks materialize, the compensation paid to farmers can be quite substantial. Who among us would turn down €1,500 right now? Not me, that’s for sure!
For now, I plan to continue working with EURORISK and next, to insure my winter crops against winter damage. By spring 2025, it will be time to start thinking about insuring summer crops against drought damage.
